Question

Distinguish between a Profit and Loss Account and a Balance Sheet. 

Answer 1

S. No.	Basis of Distinction	Profit and Loss Account	Balance Sheet
1.	Purpose	It is prepared to ascertain the net profit or net loss.	It is prepared to know the financial position.
2.	Period	It presents the results of business for a particular period, usually one year.	It is prepared at a particular date.
3.	Nature	It is an account.	It is a statement.
4.	Headings	Its two sides are called income and expenses.	Its two sides are called assets and liabilities.
5.	Contents	It contains all the nominal accounts.	It contains all the real and personal accounts.
6.	Difference	The difference in the totals of the two sides represents the net profit or net loss.	Its two sides are equal in total.
7.	Effect on accounts	The accounts transferred to it are closed and no balance exists in these accounts.	The balances of accounts included in the balance sheet are brought forward in the next year.